Pasties VAT fight goes on as Subway franchisees turn to European Court

A group of franchisees at sandwich giant Subway are expected to take their fight over the pasty tax to the European Court after losing their case at the Court of Appeal last week.

The US-owned food chain, which has 1,500 outlets in the UK, says its toasted sandwiches should attract a zero tax rating, as do cold sandwiches, but Revenue & Customs says toasted items are liable to VAT.

The group was given leave to appeal a ruling in 2013 that toasted sandwiches should attract 20 per cent VAT.

If the test case had been successful, the Treasury would have faced a £1billion tax refund.